Investor Brain

Saturday, September 03, 2011

Hiccups in TD's Latest Acquisition

Help lines swamped after some customers have trouble signing on. And currency and futures traders encounter hurdles.

Back in January 2009, when TD Ameritrade announced that it was acquiring boutique brokerage thinkorswim, we wondered what the combined firm would look like. Would the amazing pace of innovation at thinkorswim slow? Would its trading tools be available to customers of TD Ameritrade (ticker: AMTD)? Would CEO Tom Sosnoff wear his beret in Omaha, Neb., at TD’s headquarters? And what would happen when the planned conversion from Penson’s clearing operation to TD’s finally took place?

We now have the answers. Thinkorswim (http://www.thinkorswim.com) continues to operate as a separate entity, but a large percentage of its technology is available to TD Ameritrade (http://www.tdameritrade.com) customers. The once relentless pace of updates to the downloadable software platform does appear to have slowed; after nine major updates in 2009, there were only five in 2010, and just one in 2011.

SOSNOFF, THINKORSWIM’S FORMER CEO, has left it to form a new venture, tastytrade (http://www.tastytrade.com). Its goal, he says, is “changing the entire financial media space.” In the near future, we’ll take a good long look at tastytrade, where Sosnoff and his beret can be seen almost daily.

And just this month, we found out what happens when clearing for thinkorswim customers switches from Penson Financial Services to TD Ameritrade’s self-clearing operation. (Clearing firms work with exchanges to confirm each trade placed by a brokerage customer, deliver securities and ensure that paperwork is in order. The clearing firm holds your equities if you don’t receive an actual stock certificate.)

We’ve covered quite a few consolidations among online brokerages. Some went extremely well, some were disasters.

Given the number of acquisitions made over the years by TD Ameritrade—the count is nine to 12, depending on whom you talk with at the firm—I had high hopes for the thinkorswim transition. But my mailbox and Twitter account (@twcarey) have been filling up with complaints about the thinkorswim clearing conversion. The most common lament starts like this: “My account is gone! I can’t log on at all!” This during a stretch of severe market fluctuations that already were causing a great deal of anxiety.

According to TD Ameritrade’s senior vice president of trading, Steve Quirk, the original date for the conversion was to be Aug. 26. But Penson, which handled clearing for thinkorswim, said that it could complete the switchover on Aug. 13.

Thinkorswim had just sent out an e-mail explaining that customers who had accounts with the same user IDs on both its platform and TD Ameritrade’s would need a different user ID to get to their thinkorswim account after the conversion.

In fact, on the thinkorswim home page, a pop-up notice warns that “as a result of the integration with TD Ameritrade, you may have had your thinkorswim user ID modified. Please check your e-mail or mail for details.” Quirk says that some clients didn’t see the e-mail notification, so they clogged the customer-support lines, leading to a delay in reaching a human—something that had been unusual at thinkorswim.

Another issue: TD Ameritrade’s self-clearing operation isn’t set up to handle transactions involving currencies or futures in the same account, which the thinkorswim platform handled seamlessly. A key to smooth trading in these markets is a good system to transfer cash within the account—a service that should soon be operational at TD. For now, though, customers still need separate accounts for their currency and futures trades, and must have ample cash available prior to placing an order.

QUIRK ACKNOWLEDGES THAT PUSHING up the date of the conversion 13 days might not have been the best thing to do. But he reports that the telephone wait times for customer support are back to normal.

Another customer complained that the training videos that used to be available on demand on the thinkorswim support site are now available only at set times. Quirk says that the compliance department at TD Ameritrade has decided that, for legal reasons, the firm cannot currently allow the videos to stream on demand. However, he adds: “We’re not done with that one yet.”

Was this the worst clearing transition in history? No, that distinction still goes to the HarrisDirect/E*Trade debacle in early 2006, which took weeks to clear up. At TD Ameritrade, the process could have gone more smoothly, but the problems were resolved relatively quickly. Life goes on.

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Theresa W. Carey, author of "The Electronic Investor" column in Barron's, has been reviewing sites of interest to online investors since 1991. Welcome to InvestorBrain.com, which brings you news and reviews of tools for investing online.